How Do I Report My Employee Stock Options?

An employer may provide employees with the opportunity to purchase shares in the employer’s corporation at some future date, but at a price that is the current market price when the option is granted. 

There are no tax consequences when the option is granted, but when the employee exercises these stock options, a taxable benefit will be added to income. This is the difference between the market value of the shares purchased and the exercise price – what they were worth when granted. While an income inclusion results on the T4 slip, the employee may qualify for a Stock Option Deduction, too. These rules will differ if the shares come from a private Canadian corporation. Be sure to see your tax advisor for help.